Profit shifting by EU banks: evidence from country-by-country reporting

Arbeitspapier

We investigate profit shifting by the largest and systemically relevant European multinational banks using new data made available through country-by-country reporting for the financial years 2014-2016. We capture tax incentives for income shifting using a multilateral tax differential between the local tax rate and the tax rates in the other countries where the bank has operations. We find that profits - particularly those recorded in tax havens - are negatively affected by corporate taxation. Moreover, the bulk of income shifting seems to take place among subsidiaries, as foreign-to-foreign tax differences matter significantly more that home-to-foreign differentials. Simulation results suggest that the amount of shifted profits in tax havens is about 38% of true profits. The ratio between shifted and true profits drops to about 7% when selected non havens are considered.

Object Details

• ISBN: 978-92-79-82749-5
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: JRC Working Papers in Economics and Finance ; No. 2018/4

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Institutions and Services: Government Policy and Regulation ; Tax Evasion and Avoidance ; International Fiscal Issues; International Public Goods
• Subject: banks ; tax havens ; regulation ; tax avoidance ; transparency

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Fatica, Serena ; Wildmer, Gregori
• Event: Veröffentlichung
• (who): Publications Office of the European Union
• (where): Luxembourg
• (when): 2018

Further information

• DOI: doi:10.2760/326313
• Handle: http://hdl.handle.net/10419/202296
• Last update: 10.03.2025, 11:43 AM CET